Construction defect litigation can be both costly and time intensive. In July 2008, there was a dramatic development in construction defect law. The California Supreme Court, in the case of Crawford v. Weather Shield Mfg., Inc., essentially held that for residential construction subcontracts dated before 2006, subcontractors have a duty to defend the developer-builder in lawsuits that are brought against both the developer and subcontractor for defects arising from the subcontractor's alleged negligence. The court broadened the obligations of a subcontractor, since it still had a duty to defend even though the subcontractor was ultimately deemed not negligent, and in the subcontract the builder had no right of indemnity, unless the subcontractor was negligent.
Background of the Crawford Case
Crawford involved an indemnity provision, which in most instances is a promise by one party to defend the other party in lawsuits initiated by third parties, and to pay the judgment or settlement of the party faced with the third-party lawsuit.
Specifically, in Crawford, the subcontractor, Weather Shield, had promised by written contract to indemnify and defend the general contractor, J.M. Peters Co., for suits brought against JMP for damages or loss due to Weather Shield's work. Homeowners sued JMP, other developers, and subcontractors, including Weather Shield, for construction defects to their windows. Later, a jury found in favor of Weather Shield, and found that it was not negligent with the window installation. However, the issue of whether Weather Shield had a duty to defend JMP based on the indemnity provision, despite being found not negligent, remained for the California Supreme Court to decide.
Basis & Impact of California Supreme Court's Decision
In holding that Weather Shield had a duty to defend JMP, even though it was found not to be negligent, the court stated that the duty to defend was separate from the duty to indemnify, and was a duty that was independent of the outcome of the lawsuit.
The Crawford decision was a major development in the area of construction defect litigation. Now, for residential contracts entered into between developers and subcontractors before January 1, 2006, and for residential contracts between general contractors and subcontractors entered into before January 1, 2008, if a third party makes a construction defect claim against developers or general contractors, then regardless of whether the subcontractor is ultimately found negligent for damages, subcontractors will have a duty to defend. Potentially, this could have a financially devastating impact to subcontractors if they have to incur the cost of defending more lawsuits.
Limits of the Crawford Decision
In general, under California Civil Code Section 2782, subsection (c), for residential contracts that are entered into after January 1, 2009, where a subcontractor promises to indemnify the general contractor or developer for third-party lawsuits, including the cost to defend, the subcontractor is not liable for damages if the construction defects arose out of the general contractor's or developer's negligence, or if the construction defects were outside the scope of work agreed to between the parties. The California Supreme Court cited this statute as a limitation on the obligations of subcontractors in construction defect cases.
Seek Experienced Legal Counsel
Because the area of construction defect law is complex and ever changing, it is important to seek the assistance of an attorney specializing in construction defect defense if you are a developer, general contractor, or subcontractor who needs to defend against a suit for damages. At Hamrick & Evans, LLP, we offer the highest level of individualized and cost-efficient services to our clients. We routinely defend developers, general contractors, and subcontractors in complex multi-party lawsuits. We offer personalized and specialized services, and our attorneys have extensive experience in defending against construction defect claims, from the initial case evaluation through trial and appeals. Contact Hamrick & Evans, LLP today for further information or to schedule a consultation.
